Former Manchester United chairman Sir Roy Gardner has reiterated his criticism of the Glazer’s debt-laden business model. Gardner, now in charge of Championship side Plymouth Argyle, chaired the United board during the 2005 takeover and twice rejected bids from the Americans in the lead-up to a final successful offer for the club.
“It is no different to what I said at the time. I did not think it was a sustainable model,” said Gardner the former Centrica ceo of the Glazer family’s ownership of United.
In 2005 Gardner led a board that called the Glazers’ business plan “aggressive” and containing more debt that was considered “prudent” for the club. Indeed, Gardner’s prescient summary that the overly-leveraged model would bring “significant financial strain on the business” has come to stark fruition.
While Gardner’s board – including ceo David Gill – fought the Glazer family it proved unable to prevent the takeover once the American family had a secured a majority interest in the club.
To many Gardner’s worst fears have played out as predicted. Since 2005 the Glazer family first loaded £569 million onto the clubs books through a 2006 refinancing round and then issued a £504 million bond in January, which will cost the club £45 million annually in interest payments alone.
Worse still, the terms of the bond enables the Glazers to squeeze United for every last penny on the books as it seeks to pay down the Payment in Kind (PiK) debt to which the family is exposed.
Sir Roy’s intervention, as the season comes to an end, brings to the forefront United’s financial policy over the summer, with just under £20 million already spent on prospects Chris Smalling from Fulham and Javier Hernandéz from Chivas Guadalajara.
The club made made a small profit last season only after the sale of Cristiano Ronaldo to Real Madrid for £80 million. There appears little further room for Sir Alex Ferguson to move in a market that will once again be dominated by Real Madrid and Manchester City this summer.
Indeed, while Ferguson spent around £20 million on Antonio Valencia, Gabriel Obertan, Mame Biram Diouf and the free transfer Michael Owen last year, there is no guarantee more is available this close season.
There is, after all, nothing left in the kitty save for a £75 million overdraft facility.
More worrying still: the vultures are circling. While long-standing admiration for Nemanja Vidic is yet to materialise into a concrete bid, the Serbian is no closer to signing a contract extension with the club beyond 2012.
Then there’s the future of Patrice Evra and Wayne Rooney, for whom Real Madrid have much admiration. While most United supporters would rather countenance self-harm than lose the club’s two most consistent performers there are no guarantees, with even Ferguson admiting United’s finances now dictate “resale value is always at the back of our minds.”
While Rooney has little intention of moving – family life in the North West is of paramount importance – he is not yet in the top ten earners at the club according to those in the know. It’s an incongruity United’s board must surely address this summer.
Meanwhile, Madrid’s touted move for Evra’s comes amid widespread belief that Real want a new left-back for the 2010/11 season.
Gardner is probably watching with a knowing sigh.
Although there is a cautionary tale, with the 65-year-old executive having taken the reigns at Plymouth Argyle just under a year ago. Since then the board has legally separated club from ground, while overseeing the Pilgrims’ relegation to League 1 amid concern for the club’s financial health.
There but for the grace …